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June 25, 2013

When RIA Zombies Attack, Money Manager Has Survival Guide

Niemann Capital Management turns to the living dead to get impressive returns noticed

Are you an RIA or a ZIA—zombie investment advisor? That is the question, or challenge at least, put forward by one third-party money manager trying to get your attention and maybe even partner with you in managing client assets.

Niemann Capital Management, which provides separately managed ETF portfolios following a variety of popular strategies, can fairly boast some eye-peeling performance. Those numbers, both short and long term, are astutely included on the Northern California-based firm’s RIA Zombie Survival Guide, recently posted on the firm’s blog.

The message is that advisors should avoid Wall Street’s walking dead, i.e., advisors who assume the risk of purveying their own rather than professional money management of the kind Niemann can provide.

For example, if you make portfolio decisions for your clients that underperform, “you get infected by zombies and fired by your clients," Niemann’s guide advises. "If a hired money manager underperforms for long, they get bitten and you keep the AUM.”

Allying with a third-party money manager, who will perform better than an RIA, will help “stave off zombie infiltration” and allow advisors to concentrate on raising assets and serving clients, the guide adds.

While these are all stock-in-trade arguments for the SMA industry, Niemann’s chief strategy officer, Charles Halliday, says the zombie metaphor serves to “distill boring financial language in simple terms.”

Noting that we live in an “entertainment culture,” Nieman told AdvisorOne in a phone interview that investment ideas that are conveyed in an entertaining and fun way help to differentiate his firm.

“The jury is out regarding the SEC in terms of how they see some of this,” he added. But entertainment-based communications, social media and blogging are “a reality that big firms are embracing, and this allows us to be competitive.”

O’Connor Marketing’s CEO, Patrick O’Connor, author of the campaign, says the campaign has gone viral, an inference he makes from the fact that the campaign is getting more hits than the number of advisors he sent it to in a test.

“Everyday language is very clinical, very dry,” O’Connor told AdvisorOne. “By putting entertainment into it you get people to join the discussion.”

Niemann’s message is that advisors should not be tempted to think they can claim extra fees through money management but rather through gathering assets and leveraging a third-party money manager. Aside from investment performance, that manager can aid the advisor’s communication with clients through periodic investment updates, blogs and social media, as well as videos, podcasts and webcasts.

Some of those communications will doubtless tell the story of Niemann’s “short-term zombie kills,” including Niemann Dynamic, which ranked highest in Morningstar’s ETF Managed Portfolios database of 613 funds for the trailing 12 months ending May 31. Other short-term triumphs are five of its funds that ranked in the Top 5 in recent PSN Informa Rankings.

The Zombie Survival Guide also depicts some zombie slayings under “long-term zombie kills,” including several funds that trounced the S&P 500 over periods going back as far as 16 years.

Niemann’s Risk Managed fund returned an average annual 9.74% since its 1996 inception compared with the S&P’s 7.06%. Its Dynamic Fund more than doubled the S&P’s performance since the fund’s 1997 inception date.

And during two crushing bear markets—2000 to 2002 and 2007 to 2009 — several Niemann funds lost far less than the S&P. Its Risk Managed fund lost just 0.07% in the 2000-2002 bear market compared to the S&P’s loss of 47.38% during that period.

Says O’Connor: “It’s hard to be a top-ranked portfolio manager and top-ranked communicator…so it makes sense to find partners for your business. Niemann Capital Management has been around since the early 1990s. It’s market–tested, not back tested,” he says.

For his part, Halliday says campaigns like the Zombie Survival Guide are “going to be a growing part of our business” — a way “for a boutique like us” to get noticed, he says.

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